How Does the Sensitivity of Consumption to Income Vary Over Time? : International Evidence

Islamaj, Ergys ; Kose, M. Ayhan

World Bank, Washington, DC

关键词: PER CAPITA CONSUMPTION;    NATIONAL OUTPUT;    GROWTH RATES;    MONETARY POLICY;    CLOSED ECONOMIES;   

DOI  :  10.1596/1813-9450-7659
RP-ID  :  WPS7659

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper studies how the sensitivityof consumption to income has changed over time as the degreeof financial integration has risen. In standard theory,greater financial integration facilitates internationalborrowing and lending, helping to reduce the sensitivity ofconsumption growth to fluctuations in income. The paperexamines the empirical validity of this prediction using anarray of indicators of financial integration for a largesample of advanced and developing countries over the period1960-2011. Two main results are reported. First, thesensitivity of consumption to income has declined over timeas the degree of financial integration has risen. Thedecline has been more pronounced in advanced economies thanin developing ones. Second, the regression analysisindicates that a higher degree of financial integration isassociated with a lower sensitivity of consumption toincome. This finding is robust to the use of a wide range ofempirical specifications, country-specific characteristics,and other controls, such as interest rates and outcome-basedmeasures of financial integration. The paper also discussesother potential sources of the temporal changes in thesensitivity of consumption to income.